London Session Forex Recap – July 29, 2015

  • German GFK Consumer Sentiment: unchanged at 10.1 as expected
  • Swiss UBS Consumption Indicator: 1.68 actual v.s. 2.50 expected, 1.62 previous
  • French INSEE Consumer Confidence: 93 actual v.s. 94 expected, 94 previous
  • U.K. M4 Money Supply m/m: -0.5% actual v.s. 0.0% expected, 0.5% previous
  • U.K. Net Lending to Individuals: 3.8B actual v.s. 3.0B expected, 3.5B previous
  • U.K. Net Consumer Credit: 1.2B actual v.s. 1.1B expected, 1.1B previous
  • U.K. Mortgage Approvals – 66.6K actual v.s. 66.0K expected, 64.8K previous
  • U.K. CBI Distributive Trades: 21 actual v.s. 29 expected, 29 previous
  • FOMC statement coming up later

Volatility usually dries up before a major event like the FOMC statement, but that was not the case during today’s morning London forex session since the Kiwi and the pound were on the move.

We’ll start with the Kiwi. European forex traders were pricing-in Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler’s speech from earlier. And while Asian forex traders reacted by sending the Kiwi higher before letting it range, European forex traders were a tad more pessimistic since they sent the Kiwi tumbling down throughout the session.

Perhaps European traders were focusing on Wheeler’s conclusion that “some further monetary policy easing is likely to be required” and that further Kiwi “depreciation is necessary given the weakness in export commodity prices and the projected deterioration in the country’s net external liabilities over the next two years.”

NZD/USD is down by 32 pips (-0.48%) to 0.6669, NZD/CHF is down by 44 pips (-0.69%) to 0.6412, NZD/JPY is down by 39 pips (-0.46%) to 82.47

Moving along, the pound likely got a boost from the mostly positive readings for various consumer lending and spending indicators. And as a high-yielding currency, the pound also probably got a lift from the risk-on sentiment that pervaded the European market, with the FTSE 100 up by 0.82% to 6,609.30 while a round of bond-selling sent U.K. 10-year bond yields higher by 1.65% to 1.969%.

GBP/USD is up by 37 pips (+0.24%) to 1.5639, GBP/AUD is up by 87 pips (+0.41%) to 2.1398, GBP/NZD is up by 164 pips (+0.70%) to 2.3433

As for the euro, it was mixed for the forex session, but it started out slightly strong for the first half of the session even though there weren’t any major developments on the Greek drama and German GFK consumer sentiment was unchanged, so currency correlation between the euro and the strong pound was probably in play since there weren’t any other catalysts.

Well, the risk-on sentiment probably helped in kicking the DAX higher by 0.18% to 11,194.00 and caused intense bond-selling that widened German 10-year bond yields by 4.05% to 0.720%, which could have spurred some demand for the euro.

Strangely enough, the euro suddenly decided to head south halfway through the session. Again, there weren’t any catalysts that could explain the sudden weakness, but it’s probably safe to assume that some of the bulls were getting out of their positions ahead of the FOMC statement later.

EUR/USD is up by 5 pips (+0.04%) to 1.1050 with 1.1071 as session high, EUR/AUD is up by 32 pips (+0.21%) to 1.5120 with 1.5142 as session high, EUR/JPY is up by 5 pips (+0.04%) to 136.60 with 136.83 as session high

The forex calendar for the upcoming afternoon London/morning U.S. session only has a couple of items lined up, but hold on to your shorts since they promise to inject the market with healthy dose of volatility.

Up first, at 3:00 pm GMT, is U.S. pending home sales (0.9% expected, 0.9% previous). Market analysts expect an increase inline with the previous increase, but take note that existing home sales already set the tone last week by beating the consensus, so a bigger reaction is likely to come from a read below expectations.

Finally, at 7:00 pm GMT, the main event that forex traders have been waiting for will arrive – the FOMC statement. And while the consensus is that the Federal funds rate will remain unchanged at 0.25%, it is the overall sentiment and potential hints of a future rate hike that forex traders are eagerly waiting for. And do note that Federal Reserve Chairperson Janet Yellen was somewhat upbeat during her July 15 testimony before the U.S. Congress, so perhaps that sentiment will carry over.

Oh, if you plan to trade this event, make sure to check out Forex Gump’s trading guide. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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